Many people have the will to invest in the stock market but most of them lack the basic knowledge of what the stock market involves. Others will invest in the stock market but in the end lack the basic knowledge to continue and thus they collapse with time. Understanding how a stock market works can be a step towards enabling people make investments and reap benefits rather than loses. When one knows why stocks react in the way they do, then this can prevent one from panicking and selling their stocks when they shouldn’t.
What does a stock market involve?
A stock is a type of market system in which publicly traded companies have their shares issued to the public for buying and selling. The good thing with stocks is that they are far better than gambling as many people try to compare it. With gambling, you can either win or lose everything. With the stocks, it is very rare for one to lose everything that they have invested. This is what shows the huge difference between the two.
What makes the prices in stocks to go up and down?
This is something that many people usually don’t understand. The rising or falling of the prices in a stock are determined by very many factors. Some of these factors include the opinion of investors who are well known regarding the stocks in question, the media, political and social unrest, natural disasters, and the supply and demand among many others. When all of these factors have been compiled including any other factor which may also affect the stocks, then this creates the “bullish and bearish” kind of sentiment. Whenever the number of sellers in the market is more than that of willing buyers, then the prices of the stocks will tend to fall and vice versa.
Why the stock market is unpredictable?
The stock market is one of those which one cannot easily predict. However, there are issues that an investor who considers investing in the stock market should look carefully. One of these should be understanding that point in which the prices of the stocks have been fairly valued. The second consideration should that when an event will trigger a downturn on the prices of the stocks. The final one is the human decision making process which the investor should try to understand. With this, then they can be sure of the opportune time to make any move on the stocks.
Understanding the adversarial system of the stock market
The stock market comprises of millions of investors who have opposing views. This is because when one investor thinks of selling their shares, there is another one who is willing to buy them. One of these investor is wrong since they can’t be both correct. This means that one investor will make a profit while the other one will make a loss.